Settlement with SEC Gives Municipalities 180 Days to Become Compliant With Continuing Disclosure Obligations

September 8, 2016Articles

On August 24th, 2016, 71 obligated persons from 45 different states entered into voluntary settlement agreements with the Securities Exchange Commission (SEC) as part of the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative. The obligated persons included states, state authorities, towns, counties, school districts, charter schools, colleges, universities, and healthcare providers. SEC Rule 15c2-12 requires obligated persons to disclose certain information on an ongoing basis. The SEC announced the MCDC Initiative in 2013 as a way to correct what it termed “widespread and pervasive” continuing disclosure problems. Under the initiative, obligated persons that self-reported instances of noncompliance with previous continuing disclosure undertakings with their 15c2-12 continuing disclosure requirements are given more lenient settlement terms. These continuing disclosure problems included instances in which obligated persons failed to disclose they had not made continuing disclosure filings at all, as well as instances where the filings were late or incomplete.

Obligated persons who self-reported may enter into an MCDC settlement agreement without admitting or denying violations of SEC rules and regulations. As part of the settlement agreement, the obligated person has 180 days to bring itself into compliance with all current continuing disclosure requirements and past delinquent filings as well as implement policies and procedures to ensure future compliance with federal securities laws. Each obligated person must designate an individual responsible for ensuring it remains compliant with its written policies and procedures and maintain a record of the obligated person’s mandatory disclosure training. Finally, the obligated person will receive a cease and desist letter from the SEC and will be required to disclose its MCDC participation in future offering documents for a period of five years. 

Continuing disclosure will continue to be an important public finance issue. If you have any questions or concerns regarding continuing disclosure requirements and/or the MCDC Initiative, please contact your Dinsmore & Shohl attorney.